Day Traders Diary

10/20/16

 The stock market ended the Thursday affair on a flat note as the latest round of quarterly reports prompted mixed reactions from investors. Global monetary policy was also in focus as participants digested the October policy decision from the European Central Bank and some somewhat hawkish commentary from a Federal Reserve official. The Dow Jones Industrial Average (-0.2%) settled slightly behind the S&P 500 (-0.1%) and the Nasdaq Composite (-0.1%).

It was a busy day on the earning front as the third-quarter earnings reporting season continued hitting its stride. Influential names such as Verizon (VZ 49.14, -1.24), American Express (AXP 66.78, +5.53), Travelers (TRV 109.52, -6.71), Walgreens Boot Alliance (WBA 81.02, +3.84) and Union Pacific (UNP 90.64, -6.48) each reported their quarterly results, resulting in some varied assessments.

Equity indices struggled for direction at the start of the session as choppy trade in Europe increased volatility during the early portion of the U.S. session. The European Central Bank released its latest policy statement this morning, opting to maintain its key interest rates and its asset purchase levels. ECB President Mario Draghi followed up the policy inaction with noncommittal remarks. Mr. Draghi indicated that neither extending nor tapering the central bank's asset purchase program were discussed at this month's meeting, but that the board would conduct further policy review in December.

The decision took some steam out of the euro, which in turn, provided another tailwind to the greenback. The U.S. Dollar Index (98.30, +0.38, +0.39%) extended its recent winning streak as policy inaction from the ECB, an improving US rate hike picture, and largely positive economic data boosted the currency. Strengthening in the dollar weighed on the broader market as participants eyed headwinds for dollar-denominated commodities and earnings prospects of multinational companies.

The broader market overcame selling interest near midday, but the major averages were unable to make a meaningful move above their flat lines.

The S&P 500 finished off its best level of the day as ten sectors settled in the red. The lightly-weighted telecom services (-2.0%) sector finished at the bottom of the leaderboard with industrials (-0.5%) and consumer discretionary (-0.2%) also underperforming notably. On the flipside, heavily-weighted health care (+0.5%) finished in positive territory.

The PHLX Semiconductor Index finished higher by 0.8% after takeover rumors signaled that Qualcomm (QCOM 67.34, +1.55) is close to acquiring NXP Semi (NXPI 104.49, +3.46).

The health care sector (+0.5%) demonstrated relative strength as biotechnology and generic drug names outperformed. The iShares Nasdaq Biotechnology ETF (IBB 270.04, +2.56) finished higher by 1.0%, narrowing its month-to-date loss to 6.7%. In the ETF, Gilead Sciences (GILD 74.31, +0.97) jumped 1.3% after announcing top-line results from several drug studies.

In the financial sector (UNCH), Dow component American Express (AXP 66.78, +5.53) outperformed after beating bottom-line estimates for the quarter and issuing upbeat full-year earnings guidance. The name finished at the top of the price-weighted average. On the flip side, Travelers (TRV 109.52, -6.71) rounded out the index despite beating estimates. The stock fell 5.8%.

The industrial sector (-0.5%) underperformed after Union Pacific (UNP 90.64, -6.48) missed bottom-line estimates for the quarter. The stock was also downgraded to "Market Perform" from "Outperform" at Cowen.

Specialty retail names underperformed in the consumer discretionary sector (-0.1%) as eBay (EBAY 29.02, -3.50) plunged 10.8%. The company issued some disappointing guidance, which overshadowed a quarterly beat.

Treasuries finished on a mixed note as the short end of the curve underperformed. The yield on the 2-yr note settled higher by two basis points (0.82%) while the yield on the benchmark 10-yr note finished higher by one basis point at 1.75%.

Today's trading volume fell below the average of 853 million as 773 million shares changed hands at the NYSE floor.

Today's economic data included weekly initial claims, the Philadelphia Fed Survey, Existing Home Sales, and September Leading Indicators:

Initial jobless claims jumped 13,000 to 260,000 (Briefing.com consensus 249,000) for the week ending October 15.

Continuing claims for the week ending October 8 rose by 7,000 to 2.057 million.

The Philadelphia Fed Index dipped from 12.8 in September to 9.7 in October (Briefing.com consensus 5.5).

That reflects a slowing of activity, yet any number above 0.0 still points to an expansion in regional manufacturing activity.

Existing home sales increased 3.2% to a seasonally adjusted annual rate of 5.47 million in September from a downwardly revised 5.30 million (from 5.33 million) in August.

The uptick in September broke a string of monthly sales declines registered in July and August.

The Conference Board's Leading Economic Index (LEI) increased 0.2% in September, as expected, rebounding from an unrevised 0.2% decline in August.

There is no economic data of note scheduled to be released tomorrow.

Russell 2000: +7.4% YTD
S&P 500: +4.8% YTD
Nasdaq Composite: +4.7% YTD
Dow Jones: +4.2% YTD